A couple of hours after talking to an ABC correspondent about the woeful job numbers and what might be done to improve them, I was in the Bloomberg TV studios debating a guy from Heritage. He went on for several minutes about the damage being done by high taxes, excess regulation, business "uncertainty" about future tax hikes and regulatory burdens. I asked Bloomberg's host whether he was aware that corporate profits relative to national income had just hit a 60-year peak? He had heard rumors to that effect. Was he aware that taxes on corporate earnings were at a 60-year low? The Heritage guy had heard that might be the case.

Then why was uncertainty about taxes and the future burden of the Affordable Care Act holding back business investment and hiring right now? If managers thought taxes or regulatory costs might go up in the future, wouldn't it make sense to take advantage of today's low taxes and lower burdens to invest and hire today? According to the "uncertainty" argument, businesses are fearful they might face high taxes and extra health costs in 2016 or 2018. Shouldn't they expand hiring right now and scale back employment when they actually face higher costs (if they ever do)?

The "tax uncertainty" and "regulatory uncertainty" arguments would make more sense if, say, taxes were already high and might be going higher or regulatory burdens were heavy and might be getting heavier. But when taxes are at a 60-year low and the regulations are pretty much the same as they were in the 1990s boom, the argument makes no sense at all. As we used to say down on the farm, you should "make hay while the sun shines." In other words, if you think it's going to rain later in the week, it strengthens the case for cutting and baling right now.

The odd thing is, when businesses are asked why they're not expanding, "high taxes" and "heavy regulatory burdens" and "tax uncertainty" don't feature as prominent answers. They mostly say they don't see good prospects for extra sales. But right-wing economists have their talking points, even if they make little sense, and they're sticking with 'em. Another of their favorites is "... executives tell me they can't find good candidates for the job openings they have." Don't get me started on that one.

On the point that "executives tell me they can't find good candidates for the job openings they have," that is not necessarily evidence for structural rather than cyclical problems, see here. As I explain, what this generally means is that at the wage the business can offer in a depressed economy, it can't find the workers it needs. If demand for the product was higher, i.e. if the economy was doing better, the firm could offer a higher wage and it could get people to relocate, switch jobs, etc. But workers are unwilling to do so at the low wage the firm is able to offer…. [M]any of these so-called structural problems disappear when the the economy is booming.

There is, I think, another objection to the "uncertainty" story. As I asked Dr. Aparna Mathur of the American Enterprise Institute at the GAO teleconference last Wednesday morning:

The large increase in uncertainty about long-run fiscal policy came in 2001-3, when the Bush administration and the Republican congressional majority pushed through tax cuts and entitlement expansions without making any provision for funding them. I never heard anyone at AEI say a peep of criticism. How do your elders at AEI explain themselves to you when you ask them why they supported these mammoth increase in uncertainty? The large increase in uncertainty in regulatory policy came in 2009, when rather than embracing the Romneycare-Heritage exchange-based plan that became the ACA, and that is in fact very close to what Doug Holtz-Eakin and company said they would like to do during the 2008 campaign, the Republican Party went into whole-hog opposition to what had been its own ideas. Did anybody at AEI complain about this political decision?

A couple of hours after talking to an ABC correspondent about the woeful job numbers and what might be done to improve them, I was in the Bloomberg TV studios debating a guy from Heritage. He went on for several minutes about the damage being done by high taxes, excess regulation, business "uncertainty" about future tax hikes and regulatory burdens. I asked Bloomberg's host whether he was aware that corporate profits relative to national income had just hit a 60-year peak? He had heard rumors to that effect. Was he aware that taxes on corporate earnings were at a 60-year low? The Heritage guy had heard that might be the case.

Then why was uncertainty about taxes and the future burden of the Affordable Care Act holding back business investment and hiring right now? If managers thought taxes or regulatory costs might go up in the future, wouldn't it make sense to take advantage of today's low taxes and lower burdens to invest and hire today? According to the "uncertainty" argument, businesses are fearful they might face high taxes and extra health costs in 2016 or 2018. Shouldn't they expand hiring right now and scale back employment when they actually face higher costs (if they ever do)?

The "tax uncertainty" and "regulatory uncertainty" arguments would make more sense if, say, taxes were already high and might be going higher or regulatory burdens were heavy and might be getting heavier. But when taxes are at a 60-year low and the regulations are pretty much the same as they were in the 1990s boom, the argument makes no sense at all. As we used to say down on the farm, you should "make hay while the sun shines." In other words, if you think it's going to rain later in the week, it strengthens the case for cutting and baling right now.

The odd thing is, when businesses are asked why they're not expanding, "high taxes" and "heavy regulatory burdens" and "tax uncertainty" don't feature as prominent answers. They mostly say they don't see good prospects for extra sales. But right-wing economists have their talking points, even if they make little sense, and they're sticking with 'em. Another of their favorites is "... executives tell me they can't find good candidates for the job openings they have." Don't get me started on that one.

On the point that "executives tell me they can't find good candidates for the job openings they have," that is not necessarily evidence for structural rather than cyclical problems, see here. As I explain, what this generally means is that at the wage the business can offer in a depressed economy, it can't find the workers it needs. If demand for the product was higher, i.e. if the economy was doing better, the firm could offer a higher wage and it could get people to relocate, switch jobs, etc. But workers are unwilling to do so at the low wage the firm is able to offer…. [M]any of these so-called structural problems disappear when the the economy is booming.

There is, I think, another objection to the "uncertainty" story. As I asked Dr. Aparna Mathur of the American Enterprise Institute at the GAO teleconference last Wednesday morning:

The large increase in uncertainty about long-run fiscal policy came in 2001-3, when the Bush administration and the Republican congressional majority pushed through tax cuts and entitlement expansions without making any provision for funding them. I never heard anyone at AEI say a peep of criticism. How do your elders at AEI explain themselves to you when you ask them why they supported these mammoth increase in uncertainty? The large increase in uncertainty in regulatory policy came in 2009, when rather than embracing the Romneycare-Heritage exchange-based plan that became the ACA, and that is in fact very close to what Doug Holtz-Eakin and company said they would like to do during the 2008 campaign, the Republican Party went into whole-hog opposition to what had been its own ideas. Did anybody at AEI complain about this political decision?

The Most-Recent Thirty

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We Are with Her!

Looking Forward to Four Years During Which Most if Not All of America's Potential for Human Progress Is Likely to Be Wasted

With each passing day Donald Trump looks more and more like Silvio Berlusconi: bunga-bunga governance, with a number of unlikely and unforeseen disasters and a major drag on the country--except in states where his policies are neutralized.

Nevertheless, remember: WE ARE WITH HER!

Blogging: What to Expect Here

The purpose of this weblog is to be the best possible portal into what I am thinking, what I am reading, what I think about what I am reading, and what other smart people think about what I am reading...

"Bring expertise, bring a willingness to learn, bring good humor, bring a desire to improve the world—and also bring a low tolerance for lies and bullshit..." — Brad DeLong

"I have never subscribed to the notion that someone can unilaterally impose an obligation of confidentiality onto me simply by sending me an unsolicited letter—or an email..." — Patrick Nielsen Hayden

"I can safely say that I have learned more than I ever would have imagined doing this.... I also have a much better sense of how the public views what we do. Every economist should have to sell ideas to the public once in awhile and listen to what they say. There's a lot to learn..." — Mark Thoma

"Tone, engagement, cooperation, taking an interest in what others are saying, how the other commenters are reacting, the overall health of the conversation, and whether you're being a bore..." — Teresa Nielsen Hayden

"With the arrival of Web logging... my invisible college is paradise squared, for an academic at least. Plus, web logging is an excellent procrastination tool.... Plus, every legitimate economist who has worked in government has left swearing to do everything possible to raise the level of debate and to communicate with a mass audience.... Web logging is a promising way to do that..." — Brad DeLong

"Blogs are an outlet for unexpurgated, unreviewed, and occasionally unprofessional musings.... At Chicago, I found that some of my colleagues overestimated the time and effort I put into my blog—which led them to overestimate lost opportunities for scholarship. Other colleagues maintained that they never read blogs—and yet, without fail, they come into my office once every two weeks to talk about a post of mine..." — Daniel Drezner